Tag: Cambridge Assessment

Alex Ltd acquires the whole of the net assets of Lucy and Co., an unincorporated business, for £450 000 in cash and £200 000 in shares.

The book values and fair values of Lucy and Co. at the time of acquisition are shown.

   net book value (£)  fair value (£)

fixed assets   235 000   315 000

current assets   465 000    290 000 

current liabilities   (197 000)     (230 000) 

   503 000   375 000

What is the value of the goodwill arising on acquisition?

Select ONE answer:

1. £75,000
2. £128,000
3. £147,000
4. £275,000

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct == > £450K + £200k = £650k – £375k == > £275k

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A limited company purchases a partnership.

It issues to the partners 20 % debentures and pays them cash in full settlement of the purchase price.

What is true?

Select ONE answer:

1. The company’s gearing is reduced.
2. The company intended to expand its business.
3. The company’s reserves are reduced.
4. The partners now own some of the equity in the company.

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct
2. Correct
3. Not correct
4. Not correct

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Alex plc converts £2,000,000 debenture stock into £0.50 ordinary shares.

The conversion rate is 40 ordinary shares per £100 debenture stock.

What amount is credited to the Share Premium account?

Select ONE answer:

1. £800,000
2. £1,000,000
3. £1,200,000
4. £1,600,000

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct == > £2,000,000 / £100 = 20,000 units * 40 = 800,000 ordinary shares / 0.5 = £1,600,000

This work is licensed under a Creative Commons Attribution 4.0 International License.

Alex plc has the following capital structure:

• 50,000 ordinary £10 shares – £500,000
• 1,000,000 5% convertible loan stock – £1,000,000

One half of the loan stock holders converted at the rate of three new ordinary shares of £10 each per £100 of loan stock.

How many new ordinary shares were issued?

Select ONE answer:

1. 15,000
2. 150,000
3. 200,000
4. 300,000

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct = = > 500,000 convertible loan stock / 100 = 5,000 * 3 = 15,000
2. Not correct
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.